There is no sure thing when it comes to real estate investments, whether for financial gain or to avoid “wasting your cash” on rent. But renting as an adult can be fraught with uncertainty and make it harder to amass wealth than if you owned your own home. To most Americans, house ownership is the key to independence and safety, and this belief dates back at least as far as when the “American Dream” was coined.
But purchasing a property does not guarantee a positive return on investment in any way, shape, or form. In order to get “right side up” or “out from underwater” on their mortgage, homeowners who bought when the market was at its highest in 2006 and/or 2007 had to wait for the greater part of a decade.
There is no hard-and-fast rule on whether it is better to buy or rent. Nonetheless, there are certain broad factors to think about that could make renting or buying a house less of a headache, depending on your specific situation and which neighborhood in Las Vegas you’re interested in.
Let’s take a look at some of the pros and cons of owning versus renting.
Pros and Cons of Owning a Home in Las Vegas
Pro #1: Gaining Equity
With time and a rising property value, you can build equity in your home by making mortgage payments. When you have built up enough equity, you can take out a loan and use the money for something else, like buying an investment property that can generate income. You may even sell the house down the road and either keep the profits or use the money to buy a newer, bigger home.
Pro #2: Tax Benefits
The interest you pay, the property taxes you pay, and the cost of home upgrades all qualify as deductible expenses when filing your annual tax return as a homeowner.
Pro #3: Make It Your Own
When you rent, your landlord does not necessarily have to give you permission to make changes to make the place reflect your taste. Yet as the owner, you have the option to make changes to the property however you see fit. Well, unless the property is part of a HOA, because then you’ll need to follow HOA rules.
Cons #1: Inconsistent Payments
There should be no change in the amount of principal or interest you pay, but you should expect some increases in other expenses. For example, the West Coast fires and the hurricanes this year have shown us how quickly homeowner’s insurance may change. Plus, there are a number of factors, like the economy and the stock market, that might affect your property tax bill.
Cons #2: Costly Maintenance
When you rent, your landlord is responsible for any necessary repairs. However, as a homeowner, you’re on the hook because a home requires regular upkeep, which requires both time and money after you buy it.
Cons #3: Home Values Could Decline
There’s no promise that your home’s value will rise in the way you expect by the time you want to move to a new home, which could have an impact on your finances later.
Pros and Cons of Renting a Home in Las Vegas
Pro #1: Flexibility
When your lease is up, you can pack up and move if you want to. However, if you own property, you don’t have that flexibility. You’re at the mercy of the housing market, and you could be stuck in your home longer than you’d like.
Pro #2: No Maintenance Costs
As a renter, you don’t have to pay out of your pocket when something needs to be repaired—that’s the homeowner’s job.
Pro #3: No Risks
Investing in real estate may be dangerous, as the housing crisis revealed. If you’re renting, the landlord takes on all the responsibility for potential disasters. You’ll never have to worry about being trapped in a house because you can’t afford the mortgage again.
Cons #1: Rent Increases
In a year or two, what do you think your rent will be? You can’t be sure until the time comes, so your yearly budget will always be iffy. If the value of your rental property goes up quickly, your monthly payments may go up by a lot.
Cons #2: No Equity or Tax Benefits
In spite of the fact that you are the one making the monthly payments, your landlord is the one who is benefiting financially. Also, if you want to get back at Uncle Sam (aka not pay property tax), you shouldn’t rent. There is no relief from capital gains or mortgage interest while relocating. It’s disheartening to think about wasting money.
Cons #3: No Personalization
As a renter, you can’t make any changes without the landlord’s approval.
Owning vs. Renting: Which Is Best?
If you’re happy where you are and don’t plan on moving anytime soon, it makes financial sense to buy a property in the current market. A rental could be a viable short-term choice if the location you ultimately see yourself settling in isn’t in your five-ish-year plan. Before making a final decision, it’s wise to consider all of your alternatives, like looking into rent-to-own properties. Of course, you can always reach out to the top real estate agents in Las Vegas for advice.